Management: Foundations & Applications, 1St Edition

Management: Foundations & Applications, 1st edition

Strategic management

Chinese acquisitions

Summary

Leading Chinese indicators, such as imports of oil or industrial output, all indicate a doubling every two to three years. This is going to place enormous pressure on suppliers of raw materials. Subsequently, China is taking a new look at acquisitions across the world in a bid to secure control over these raw material commodities, which will be needed to fuel its continued domestic growth. In this program, the strategies of both the Australian and Chinese governments are discussed.

Transcript

Whitney Fitzsimmons: And, in a bid to secure control over the commodities it needs to fuel domestic growth, China is taking a fresh look at acquisitions across the world, and now the Australian government has given Chinese-state-owned mining company Qiao Xing the all clear to pursue a $500 million takeover of Indophil resources.

Nidhi Dutt: The deal currently awaiting Chinese government approval will give Qiao Xing a 34.2 percent stake of the Tampakan copper and gold project in the Philippines. The deposits will take six years to develop at an estimated cost of $5.2 billion. But once in operation they’ll produce 340 000 tons of copper and 550 000 ounces of gold per year.

Nick Raffan, Fat Prophets: That project was a multi-billion dollar project, way out of the scope of Indophil to fund and it makes sense for the Chinese to step in and buy the project in development.

Nidhi Dutt: Reports suggest all parties involved are keen to seal a deal but analysts say the lack of hostility may have something to do with the fact that the Australian company’s assets are located off-shore.

Frank Tudor, Australia China Business Council: It impacts on the government, they’ll look at the impact on the operating company, the competitive nature of the industry, certainly national security issues, they look for good corporate governance.

Nidhi Dutt: This latest take-over bid is consistent with China’s moves to secure resources across Asia-Pacific and beyond. Yanzhou Coal Mining recently bought Australia’s Felix Resources for $3.2 billion.

Nick Raffan: If we have a look at the leading Chinese indicators, whether it’s imports of oil or heavy industrial output, they’re all doubling every two to three years and that’s going to place an enormous pressure on the suppliers of raw materials.

Nidhi Dutt: But it’s not the only emerging nation staking out commodity producers. India’s Jindal Steel and Power is embroiled in a bidding war with China’s Meijinover Australia’s coal exporter, Rocklands Richfield.

Frank Tudor: We are a very small country and we typically have an investment requirement which exceeds our savings so we’ve always historically looked to the external business community, the international business community, to seek the funds to actually develop the resources and in effect maintain our standard of living.

Nidhi Dutt: Current indications are that China will need bulk commodities to drive domestic growth for some years. As the world’s largest coal exporter Australia is in a good position to service its needs.